Budget 2016

1.
Relief to small tax payers

(a) Rebate under Sec 87A: With the objective of providing relief to resident individuals in the lower income slab i.e.
total income not exceeding Rs. 5,00,000, section 87A is proposed to be amended so as to increase the maximum
amount of rebate available from existing limit of Rs.2,000 to Rs.5,000.
(b) Maximum limit of deduction under section 80GG increased: The maximum limit of deduction under section
80GG, in respect of rent paid by individuals who do not get any house rent allowance from the employer and who do
not own any house, proposed to be increased from Rs. 2,000 p.m to Rs. 5,000 p.m.
(c) Increase in threshold limit for persons other than companies /LLP having income from business opting
presumptive taxation under Section 44AD: In order to reduce the compliance burden of the small tax payers and
facilitate the ease of doing business, the threshold limit for availing the benefit of presumptive taxation scheme
proposed to be increased from Rs. 1 crore to Rs. 2 crore, in respect of eligible businesses. The threshold limit
proposed to be increased to bring relief to large number of assesses in the Micro Small and Medium Enterprises
(MSME) category.
(d) Presumptive taxation scheme extended to professionals: In order to rationalize the presumptive taxation
scheme and to reduce the compliance burden of the small tax payers having income from profession and to facilitate
the ease of doing business, the presumptive taxation regime proposed to be extended to professionals having gross
receipts not exceeding Rs. 50 lakhs in the previous year at a sum equal to 50% of such gross receipts.
(e) Threshold limit increased for tax audit for persons having professional Income: The threshold limit for tax
audit under section 44AB, for getting accounts audited proposed to be increased from Rs. 25 lakhs to Rs. 50 lakhs,
in case of persons carrying on profession.
2. Measures to boost growth and employment generation
(a) Corporate Tax proposals:
(i) The Corporate Tax rate was proposed to be reduced from 30% to 25% over a period, accompanied by
rationalization and removal of various tax exemptions and incentives. The following are some of the tax exemptions
and incentives which are proposed to be withdrawn in phased manner:
The accelerated depreciation under Income-tax Act will be limited to 40% from 01.04.2017
The benefits of deductions for Research would be limited to 150% from 01.04.2017 and 100% from
01.04.2020
The benefits of Section 10AA to new SEZ units will be available to those units which commence activity
before 31.03.2020.
Weighted Deduction under section 35CCD for skill development will continue up to 01.04.2020
(ii) Manufacturing companies incorporated on or after 1.03.2016 are proposed to be given an option to be taxed at
25% plus surcharge and cess provided they do not claim profit linked or investment linked deductions and do not
avail of investment allowance and accelerated depreciation.
(iii) For relatively small enterprises i.e., companies with turnover not exceeding Rs 5 crore (in the financial year
ending March 2015), the rate of corporate tax reduced from 30% to 29% plus surcharge and cess, for the next
financial year.
(iv) Tax Incentives to start ups: With a view to providing an impetus to start-ups and facilitate their growth
in the initial phase of their business, a deduction of 100% of the profits and gains derived by an
eligible start-up from a business involving innovation development, deployment or
commercialization of new products, processes or services driven by technology or intellectual
property proposed to be provided. Such benefit would be available to an eligible start-up which is
setup before 01.04.2019.
The deduction may, at the option of the assessee, be claimed by him for any three consecutive
A.Y out of five years beginning from the year in which the eligible start-up is incorporated.
MAT will apply in such cases and Capital Gains will not be taxed if invested in
regulated/notified Fund of Funds by individuals in notified startups, in which they hold majority
shares.
(b) Concessional Tax Regime for income from patents: In order to encourage indigenous research &
development activities and to make India a global R & D hub, the Government has decided to put in place a
concessional taxation regime for income from patents is proposed. A concessional rate of 10% proposed for taxing
income from world exploitation of patents developed and registered in India.
(c) Complete Pass through status securitization trust: In order to encourage more investment in Asset
Reconstruction Companies (ARC), it is proposed to provide complete pass through of income to securitization trust.
Consequently, the income will be taxed in the hands of investors instead of the trust. However the trust will be
liable to deduct tax at source.
(d) Deferment of POEM: The determination of residency of foreign company on the basis of place of effective
management (POEM) is proposed to be deferred by one year.
3. Measures for moving towards a pensioned society
(a) (i) Recognised provident fund and superannuation fund: In order to bring greater parity in tax treatment on
different types of pension plans, it is proposed to provide in respect of the contributions made on or after 1st April
2016 by an employee participating in a recognised provident fund and superannuation fund, upto 40% of the
accumulated balance attributable to such contribution on withdrawal shall be exempt from tax. In effect, the 100%
exemption has been reduced to 40%.
(ii) Annuity Plan: Any payments in commutation of any annuity purchased out of contributions made on or after 1st
day of April, 2016 which exceeds 40% of the annuity, to be chargeable to tax.
(iii) National Pension System: It is also proposed to provide any payment from National Pension System Trust to an
employee on account of closure or his opting out of the pension scheme referred to in Section 80CCD, to the extent it
does not exceed 40% of the total amount payable to him at the time of closure or his opting out of the scheme, to be
exempt from the tax.
Also annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all the three cases
(i.e., (i), (ii) & (iii) above).
(iv) Monetary limit for employer contribution to EPF: Also, a monetary limit for contribution of employer in recognized
provident fund and superannuation fund of Rs 1.5 lakh per annum for taking tax benefit is proposed.
4. Measures for promoting affordable housing
(a) 100% deduction of the profits of an assessee developing and building affordable housing projects: With a view
to incentivise affordable housing sector as a part of larger objective of 'Housing for All', it is proposed that 100%
deduction of the profits would be allowed to an assessee developing and building affordable housing projects, if the
housing project is approved by the competent authority before the 31st March, 2019 and completed within 3
years of approval.
(b) Additional deduction of interest to first home buyers: In furtherance of the goal of the Government of
providing 'housing for all, it is proposed to incentivise first-home buyers availing home loans, by providing additional
deduction of Rs. 50,000 in respect of interest on loan taken for residential house property from any financial
institution.
Conditions:
This incentive is proposed to be available to a
i.
house property of a value less than Rs. 50 lakhs
ii.
Loan of an amount not exceeding Rs. 35 lakh has been sanctioned during the Financial Year
2016-17. Further, this benefit proposed to be extended till the repayment of loan continues.
(c) SPV would be exempted from Dividend Distribution Tax (DDT) on distribution made to Business Trust: In
order to rationalize the taxation regime for business trusts (REITs and Invits) and their investors, it is proposed to
provide a special dispensation and exemption from levy of dividend distribution tax. Accordingly, the SPV would not
be liable to pay DDT on the income distributed to business trusts. Such dividend received by the business trust
and its investor shall not be taxable in the hands of trust or investors.
5. Additional resource mobilization for agriculture, rural economy and clean environment
(a) Gross Dividend would be taxable in the hands of recipients: The income by way of gross dividend, to be
chargeable to tax in the case of an individual, Hindu undivided family (HUF) or a firm, who is resident in India @ 10%,
if the same is in excess of Rs. 10 lakh
(b) Rate of surcharge increased from 12% to 15%: The surcharge rate to be raised from 12% to 15% on persons,
other than companies, firms and cooperative societies having income above Rs. 1 crore.
(c) Scope of Tax Collection at Sources (TCS) expanded to include sale of luxury cars and other goods and
services: In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the
flow of unaccounted money in the trading system and to bring high value transactions within the tax net, it is
proposed to provide that the :
seller shall collect the tax @1% from the purchaser on sale of motor vehicle of the value
exceeding Rs. 10 lakhs and sale in cash of any goods (other than bullion and jewellery), or providing
of any services (other than payments on which tax is deducted at source under Chapter XVII-B)
exceeding Rs. 2 lakhs.
(d) Equalisation levy of 6% on the non-residents from e-commerce transactions: In order to tap tax on income
accruing from e-commerce transactions to non-residents from India, it is proposed that a person making payment to a
non-resident, who does not have a permanent establishment, exceeding in aggregate Rs. 1 lakh in a year, as
consideration for online advertisement, will withhold tax at 6% of gross amount paid, as Equalization levy. The levy
will only apply to B2B transactions.
6. Reducing litigation and providing certainty in taxation
(a) Limited period Compliance Window to be introduced: For domestic taxpayers to declare undisclosed income or
income represented in the form of any asset and clear up their past tax transgressions, the Income Declaration
Scheme, 2016 proposed to be introduced as limited period compliance window for taxing such undisclosed income
paying @ 30%, plus surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income.
There will be no scrutiny or enquiry regarding income declared in these declarations under the Income-tax Act, 1961
or the Wealth-tax Act, 1957 and the declarants will have immunity from prosecution.
(b) The Direct Tax Dispute Resolution Scheme, 2016 : In order to reduce the huge backlog of cases and to enable
the Government to realise its dues expeditiously, the Direct Tax Dispute Resolution Scheme, 2016 proposed to be
introduced in relation to tax arrear and specified tax. Under this scheme, the declarant would be required to pay tax at
the applicable rate plus interest upto the date of assessment and no penalty would be leviable for disputed tax
upto Rs. 10 lakhs. However, in case of disputed tax exceeding Rs. 10 lakhs, 25% of the minimum penalty
leviable shall also be required to be paid.
(c) One time Dispute Resolution scheme for cases ongoing under retrospective amendment:
Under the Direct Tax Dispute Resolution Scheme, 2016, person may also make a declaration in respect of any tax
determined in consequence of or is validated by an amendment made with retrospective effect in the Income-tax Act,
1961 or Wealth-tax Act, 1957, as the case may be, for a period prior to the date of enactment of such amendment
and a dispute in respect of which is pending as on 29.02.2016, subject to their agreeing to withdraw any pending
case lying in any Court or Tribunal or any proceeding for arbitration, mediation etc.. Consequently, they can settle the
case by paying only the tax arrears in which case liability of the interest and penalty shall be waived.
(d) Penalty leviable for concealment of income rationalised: The entire scheme of penalty proposed to be
modified by providing different categories of misdemeanour with graded penalty and thereby substantially reducing
the discretionary power of the tax officers. The penalty rates will now be 50% of tax in case of underreporting of
income and 200% of tax where there is misreporting of facts.
7. Simplification and rationalization of taxation

(a) Exemption from requirement of furnishing PAN under section 206AA to certain non-resident: In order to reduce
compliance burden, section 206AA proposed to be amended so as to provide that the provisions of this section shall
not apply to a non-resident, on furnishing of alternative documents, subject to such conditions as may be prescribed.
(b) Rationalization of tax deduction at Source (TDS) provisions: In order to rationalise the rates and base for TDS
provisions, the existing threshold limit for deduction of tax at source and the rates of deduction of tax at source are
proposed to be revised in the case of Winnings from Horse Race, Payments to Contractors, Insurance commission,
Commission on sale of lottery tickets etc. This would improve cash flow of small tax payers.
8.Use of Technology for creating accountability
(a) Scope for e-assessment proposed to be expanded: Expansion in the scope of e-assessments to all assesses in 7
mega cities in the coming years, reducing face to face contact with the assesses.
(b) Rate of interest on refunds to be increased: The rate of interest on the refunds to be increased from 6% p.a. to 9%
p.a., in case there is delay in giving effect to Appellate order beyond ninety days.
(c) E-sahyog project to be expanded: Income-tax Department (ITD) will fully expand the pilot initiative of e-Sahyog
with a view to reduce compliance cost, especially for small tax payers. The e-Sahyog pilot project is to provide an
online mechanism to resolve mismatches in income-tax returns without requiring taxpayers to attend the Income-tax
office.
Tax Deduction at Source and Tax Collection at Source

Under the scheme of deduction of tax at source as provided in the Act, every person responsible for
payment of any specified sum to any person is required to deduct tax at source at the prescribed
rate and deposit it with the Central Government within specified time. However, no deduction is
required to be made if the payments do not exceed prescribed threshold limit.
In order to rationalise the rates and base for TDS provisions, the existing threshold limit for deduction
of tax at source and the rates of deduction of tax at source are proposed to be revised as under .
read TDS-TCS rates for FY 2015-16 here
1.
Section 192A (Payment of accumulated balance of PF due to an employee)-Proposed to increase the

threshold limit from Rs. 30,000/- to Rs. 50,000/- for the purpose of deducting of TDS w.e.f. 1st June 2016.
2.
Section 194BB (Winnings from Horse Race)- Proposed to increase threshold limit from Rs. 5,000/- to Rs
10,000/- for the purpose of deducting of TDS w.e.f. 1st June 2016.
3.
Section 194C (Payments to Contractors) - Proposed to increase the aggregate threshold limit from Rs.
75,000/- to Rs.1,00,000/- w.e.f. 1st June, 2016.
4.
Section 194D (Insurance Commission) Proposed to decrease threshold limit from Rs. 20000/- to Rs. 15000/and rate of TDS also decreased from 10% to 5% w.e.f. 1st June 2016
5.
Section 194DA (Payment in respect of Life Insurance Policy)- Proposed to decrease the rate of TDS from
2% to 1%. w.e.f. 1st June 2016.
6.
Section 194EE (Payments in respect of NSS Deposits)- Proposed to decrease the rate of TDS from 20% to
10% w.e.f. 1st June 2016.
7.
Section 194G (Commission on sale of lottery tickets)- Proposed to increase threshold limit from Rs. 1,000/to Rs. 15,000/- and Rate of TDS is decrease from 10% to 5% w.e.f 1st June 2016.
8.
Section 194H (Commission or brokerage) - Proposed to increase threshold limit from Rs. 5,000/- to Rs.
15,000/- and rate of TDS decreased from 10% to 5% w.e.f 1st June 2016
9.
Section 194K (Income in respect of Units) and Section 194L (Payment of Compensation on acquisition of
Capital Asset)- Proposed to be omitted w.e.f. 1st June 2016.
10. Section 194LA (Payment of compensation on acquisition of certain immovable property) - Proposed to
increase the threshold limit from Rs.2,00,000/- to Rs.250000/- w.e.f. 1st June, 2016.
11. Section 194LBB (Units of Investment Funds) to deducted TDS (a) at the rate of 10% where the payee is a
resident; (b) at the rates in force, where the payee is a non-resident (not being a company) or a foreign
company w.e.f 1st June 2016
12. Section 194LBC is proposed to be inserted where any income is payable to an investor, being a resident, in
respect of an investment in a securitisation trust TDS is to be made @: (i) 25% if the payee is an individual
or a Hindu undivided family; (ii) 30% if the payee is any other person.
13. It is proposed to amend section 197 to include section 194LBB, 194LBC in the list of sections for which a
certificate for deduction of tax at lower rate or no deduction of tax can be obtained w.e.f 1st June 2016
14. It is proposed to amend the provisions of section 197A for making the recipients of payments referred to in
section 194-I (Rent) also eligible for filing self-declaration in Form no 15G/15H for non-deduction of tax at
source in accordance with the provisions of section 197A w.e.f 1st June 2016
15. It is proposed to amend section 206AA so as to provide that the said section shall not apply to a
nonresident, not being a company, or to a foreign company, in respect of- (a) Payment of interest on long
term bond referred in section 194 LC; (b) Any other payment subject to condition as may be prescribed on
w.e.f 1st June 2016.
16. It is proposed to amend the section 206C (TCS) to provide that the seller shall collect the tax at the rate of
1%: (a) from the purchaser on sale of motor vehicle of the value exceeding Rs. 10 Lacs; and (b) sale in cash
of any goods (other than bullion and jewellery) or providing of any services (other than payments on which
TDS is made) exceeding Rs. 2 Lacs w.e.f 1st June 2016.
Tax Collection at Source (TCS) on sale of vehicles; goods or services

The existing provision of section 206C of the Act, inter alia, provides that the seller shall collect tax at source at
specified rate from the buyer at the time of sale of specified items such as alcoholic liquor for human consumption,
tendu leaves, scrap, mineral being coal or lignite or iron ore, bullion etc. in cash exceeding two lakh rupees.
In order to reduce the quantum of cash transaction in sale of any goods and services and for curbing the flow of
unaccounted money in the trading system and to bring high value transactions within the tax net, it is proposed to
amend the aforesaid section to provide that the seller shall collect the tax at the rate of one per cent from the
purchaser on sale of motor vehicle of the value exceeding ten lakh rupees and sale in cash of any goods (other than
bullion and jewellery), or providing of any services (other than payments on which tax is deducted at source under
Chapter XVII-B) exceeding two lakh rupees.
It is also proposed to provide that the sub-section (1D) relating to TCS in relation to sale of any goods (other than
bullion and jewellery) or services shall not apply to certain class of buyers who fulfil such conditions as may be
prescribed.
This amendment will take effect from 1st June, 2016
Exemption from requirement of furnishing PAN under section 206AA to certain non-resident.
The existing provision of section 206AA, inter alia, provides that any person who is entitled to receive any sum or
income or amount on which tax is deductible under Chapter XVIIB of the Act shall furnish his Permanent Account
Number to the person responsible for deducting such tax, failing which tax shall be deducted at the rate mentioned in
the relevant provisions of the Act or at the rate in force or at the rate of twenty per cent., whichever is higher. The
provisions of section 206AA also apply to non-residents with an exception in respect of payment of interest on longterm bonds as referred to in section 194LC.
In order to reduce compliance burden, it is proposed to amend the said section 206AA so as to provide that the
provisions of this section shall also not apply to a non-resident, not being a company, or to a foreign company, in
respect of any other payment, other than interest on bonds, subject to such conditions as may be prescribed.
This amendment will take effect from 1st June, 2016.
Rationalization of tax deduction at source provisions relating to payments by Category-I and Category-II
Alternate Investment Funds to its investors.
The Finance Act, 2015 had inserted a special taxation regime in respect of Category-I and II Alternative Investment
Funds (investment fund) registered with SEBI. The special taxation regime is intended to ensure tax pass through
status in respect of these investment funds which are collective investment vehicles. The special regime is contained
in sections 10(23FBA), 10 (23FBB), 115UB and 194LBB of the Act. Under this regime, the income of the investment
fund (not being in the nature of business income) is exempt in the hands of investment fund but income received by
the investor from the investment fund (other than income which is taxed at the level of investment fund) is taxable in
the hands of investor. The taxation in the hands of investors is in the same manner and in the same proportion as it
would have been, had the investor received such income directly and not through the investment fund. The existing
provisions of section 194LBB provides that in respect of any income credited or paid by the investment fund to its
investor, a tax deduction at source (TDS) shall be made by the investment fund @ 10% of the income. Under section
197 of the Act, facility for certificate for deduction of tax at lower rate or no deduction is available in respect of
sections enumerated therein, if the Assessing Officer is satisfied that total income of the recipient justifies issue of
such certificate, section 194LBB is currently not included in this provision.
It has been represented that the existing TDS regime has created certain difficulties. The non-resident investor is not
able to claim benefit of lower or NIL rate of taxation which is available to him under the relevant Double Taxation
Avoidance Agreement (DTAA), and deduction of tax @10% is to be undertaken mandatorily even if under DTAA, the
income is not taxable in India. There is no facility for any investor to approach the Assessing Officer for seeking
certificate for TDS at a lower or NIL rate in respect of deductions made under section 194LBB.
In order to rationalise the TDS regime in respect of payments made by the investment funds to its investors, it is
proposed to amend section 194LBB to provide that the person responsible for making the payment to the investor
shall deduct income-tax under section 194LBB at the rate of ten per cent where the payee is a resident and at the
rates in force where the payee is a non-resident (not being a company) or a foreign company. Further, it is proposed
to amend section 197 to include section 194LBB in the list of sections for which a certificate for deduction of tax at
lower rate or no deduction of tax can be obtained. Consequential changes are also proposed to be made to the
definition of "rates in force" so as to include section 194LBB in it.
These amendments will take effect from 1st June, 2016.
[Clause 3, 81 & 83]
Enabling of Filing of Form 15G/15H for rental payments
The provision of sub-section 194 -I of the Act, inter alia, provides for tax deduction at source (TDS) for payments in
the nature of rent beyond a threshold limit. The existing provisions provide threshold of Rs. 1,80,000 per financial
year for deduction of tax under this section. In spite of providing higher threshold for deduction tax under this section,
there may be cases where the tax payable on recipient's total income, including rental payments , will be nil. The
existing provisions of section 197A of the Income-tax Act, inter alia provide that tax shall not be deducted, if the
recipient of certain payments on which tax is deductible furnishes to the payer a self- declaration in prescribed
Form.No. 15G/15H declaring that the tax on his estimated total income of the relevant previous year would be nil. In
order to reduce compliance burden in such cases, it is proposed to amend the provisions of section 197A for making
the recipients of payments referred to in section 194-I also eligible for filing self-declaration in Form no 15G/15H for
non-deduction of tax at source in accordance with the provisions of section 197A.
This amendment will take effect from 1st June, 2016.
CHANGES IN SERVICE TAX -BUDGET2016 DETAILED

ANALYSIS
Amidst huge expectations, the Honble Finance Minister Shri. Arun Jaitley presented
the third full-year Budget of the Honble Prime Minister Shri. Narendra Modi's
Government on February 29, 2016, Monday.The Budget 2016, a big test for
Shri.Jaitley, is a tough balancing act between the fiscal consolidation and muchneeded spending to revive growth in the economy. With an eye on supporting the
small tax-payer and the small investor, the Minister announced a slew of schemes,
and exemptions.
In his Budget speech, Shri. Jaitley has said that the Government shall also
endeavour to continue with the ongoing reform programme and ensure the passage
of the Constitutional amendments to enable the implementation ofthe Goods and
Services Tax (GST), the passage of Insolvency and Bankruptcy law and other
important reform measures, which are pending before the Parliament.
We are sharing with you the key highlights of the Union Budget 2016 in the arena of
Indirect Taxes:
changes under Service TAX

A.
Enabling provision for levy of KrishiKalyan Cess (w.e.f 01.06.2016):
An enabling provision is being made to empower the Central Government to

impose a Krishi Kalyan Cess on any or all the taxable services at a rate of
0.5% on the value of any or all taxable services.
The proceeds from this Cess would be utilized for the purposes of financing
and promoting initiatives to improve agriculture or for any other purpose
relating thereto.
Credit of this Cess shall be allowed after due amendment yet to be made in
the Cenvat Credit Rules, 2004 to be used for payment of the proposed Cess
on the service provided by a service provider.
The provisions of Chapter V of the Finance Act, 1994 and the rules made
there under, including those relating to refunds and exemptions from tax,
interest and imposition of penalty shall, as far as may be, apply in relation to
the levy and collection of the Krishi Kalyan Cess on taxable services, as they
apply in relation to the levy and collection of tax on such taxable services.
B.
Changes In Chapter V of the Finance Act, 1994 [the Finance Act] (Will
come into force when the Finance Bill, 2016 is enacted unless otherwise
stated):-
I.
Changes in relation to the Negative List Section 66D of the Finance

Act:-
Section 66D(l):Proposed to be deleted

Presently, specified education services viz. services by way of pre-school education,
higher secondary school education or equivalent, education as a part of a
curriculum for obtaining a qualification recognised by any law for the time being in
force, education as a part of an approved vocational education course,are covered
under Section 66D(l) of the Finance Act. These services are proposed to be deleted.
However, corresponding exemption is inserted in the Mega Exemption Notification
by amending the definition of educational institutionsto include an institution
providing such services as was specified in Section 66D(l) of the Finance Act [Read
with Notification No. 9/2016-ST dated 01.03.2016 vide which changes have been
made in the Mega Exemption List of Services in the Mega Exemption Notification].
Section 66D(o)(i):Proposed to be deleted w.e.f. 01.06.2016

Presently, Section 66D(o)(i) of the Finance Act covers service of transportation of passengers, with or
without accompanied belongings, by a stage carriage, which is proposed to be deleted w.e.f
01.06.2016.Corresponding to this deletion, new entry No. 23(bb)] has been inserted in the Mega
Exemption Notification to exempt services by a stage carrier other than air-conditioned stage carriage.
[Read with Notification No. 9/2016-ST dated 01.03.2016 vide which changes have been made in the
Mega Exemption List of Services in the Mega Exemption Notification]
Further, Service tax is proposed to be levied on service of transportation of passengers by air
conditioned stage carriage, @ 40% after abatement of 60% (as applicable to transportation of
passengers by contract carriage) without input tax credit, with effect from 01.06.2016 [Read with
Notification No. 08/2016-ST dated 29.02.2016 vide which changes have been made in the Abatement
Notification]
Section 66D(p)(ii):Proposed to be deleted w.e.f. 01.06.2016

Presently, Section 66D(p)(ii) of the Finance Act covers services by way of transportation of goods by
an aircraft or a vessel from a place outside India up to the customs station of clearance, which is
proposed to be deleted w.e.f 01.06.2016.
Corresponding to this deletion, new entry [No. 53] has been inserted in the Mega Exemption
Notification to such services by an aircraft.[Read with Notification No. 9/2016-ST dated 01.03.2016 vide
which changes have been made in the Mega Exemption List of Services].
However, the services provided by vessels would be taxable and the domestic shipping lines registered
in India will pay service tax under forward charge while the services availed from foreign shipping line
by a business entity located in India will get taxed under reverse charge at the hands of the business
entity. The service tax so paid will be available as credit with the Indian manufacturer or service
provider availing such services (subject to fulfillment of the other existing conditions). It is clarified that
service tax levied on such services shall not be part of value for custom duty purposes.
In addition, Cenvat credit of eligible inputs, capital goods and input services is being allowed for
providing the service by way of transportation of goods by a vessel from the customs station of
clearance in India to a place outside India as export of services. Consequential amendments are being
made
in
Cenvat
Credit
Rules,
2004.
II.
Other
Important
Changes
in
the
Finance
Act:-
Changes in Section 65B of the Finance Act:

Section 65B(11) of the Finance Act is proposed to be deleted containing the definition
of the term "approved vocational education course", with the deletion of Section
66D(l) of the Finance Act.
It shall be incorporated in the Mega Exemption Notification with insertion of
corresponding exemption thereunder.
Section 65B(44) of the Finance Act provides definition of the term service.
Explanation 2(ii)(a) in Section 65B(44) of the Finance Act, is being amended so as to
clarify that any activity carried out by a lottery distributor or selling agents of the
State Government under the provisions of the Lotteries (Regulation) Act, 1998 (17
of 1998), are liable to Service tax.
Section 65B(49) of the Finance Act containing definition of the term support
services has been deleted w.e.f 01-04-2016 vide Notification No. 15/2016 ST
dated
01.03.2016.
Changes in Section 66E of the Finance Act:

After clause (i), clause (j) is inserted to include assignment by the Government of
the right to use the radio-frequency spectrum and subsequent transfers
thereofunder the list of Declared services.Meaning thereby, assignment by
Government of the right to use the spectrum as well as subsequent transfers of
assignment of such right to use is a service leviable to Service tax and not sale of
intangible goods.
The liability to pay Service tax on any service provided by Government or a local
authority to business entities shall be on the service recipient.Consequently,
Reverse charge Notification No. 30/2012-ST is being amended so as to delete the

words by way of support services appearing at Sl. No. 6 of the Table in the said
notification with effect from 01.04.2016. Further,01.04.2016 is being notified as the
date from which the words by way of support services shall stand deleted from
paragraph 1, clause A (iv),item (C) of Reverse Charge Notification No. 30/2012ST.The above changes shall come into effect from the 01.04.2016.
It is being provided that Cenvat credit of Service tax paid on amount charged for
assignment by Government or any other person of a natural resource such as radiofrequency spectrum, mines etc. shall be spread over the period of time for which
the rights have been assigned. It is also being provided that where the
manufacturer of goods or provider of output service further assigns such right to
use assigned to him by the Government or any other person, in any financial year,
to another person against a consideration, balance Cenvat credit not exceeding the
Service tax payable on the consideration charged by him for such further
assignment, shall be allowed in the same financial year. It is also being provided
that Cenvat credit of annual or monthly user charges payable in respect of such
assignment shall be allowed in the same financial year.
Changes in Section 67A of the Finance Act:

Section 67A is proposed to be amended to obtain specific rule making powers in
respect of Point of Taxation Rules, 2011. (Corresponding amendments carried out in
the Point of Taxation Rules, 2011, which would come into force w.e.f. the date of
enactment of the Finance Bill, 2016).
The Point of Taxation Rules, 2011 (POTR) have been framed under provisions of
clause (a) and (hhh) of sub-section (1) of section 94, now specific powers is also
being obtained under Section 67A to make rules regarding point in timeof rate of
service tax. Thus, any doubt about the applicability of Service tax rate or apparent
contradiction between section 67A and POTR would betaken care of. Therefore,
consequent modifications have been done inPOTR.
Rule 5 of POTR applies when a new service comes into the service tax net.Further,
in rule 5 of POTR, it is provided that in two specified situations the new levy would
not apply. Another Explanation is being inserted therein stating that in situations
other than those specified where new levy or tax is not payable, the new levy or tax
shall be payable. The above changes shall come into effect from 01.03.2016.
Changes in Section 73 of the Finance Act:

Section 73 is proposed to be amended toextend the limitation period for recovery of Service tax not
levied or paid or shortlevied or short paid or erroneously refunded, for cases not involving fraud,
collusion, suppression etc., by one year, i.e., from 18 months to 30 months.5 year limitation period in
case of fraud etc., has not beenchanged.
There is change in the rate of interest on delayed payment of Service tax, in the
following manner:
Seri
al
No.
Situation
Rate
simple
interest
1.
Collection of any amount as Service tax but failing to

pay the amount so collected to the credit of the
Central Government on or before the date on which
such payment becomes due.
24%
2.
Other than in situations covered under serial number

1 above.
15%
of
In case of assessees, whose value of taxable services in the preceding year/years covered by the
notice is less than Rs. 60 Lakhs, the rate of interest on delayed payment of Service tax will be 12%.
Further, for the amount collected in excess of the tax assessed or determined Section 73B of the
Finance Act, 15% rate of interest would be applicable as against 18%.
(Read with the Notification No. 13 & 14/2016 ST dated 01.03.2016)

Explanation is proposed to be inserted to provide that penalty proceedings under Section 78A
(Penalty for offences by director, etc., of company)shall be deemed to be closed in cases where
the main demand and penalty proceedings have been closed under Section 76/ Section 78 of the
Finance Act.

Section 89 of the Finance Act (Offence and Penalties), is proposed to be amended to
enhance the monetary limit for filing complaints for punishable offences to Rs. 2
crores from Rs. 50 lakhs.

Sub-section (2) to Section 90 of the Finance Act is proposed to restrict the power to
arrest only to situations where the tax payer has collected the Service tax but not
deposited it with the exchequer, and amount of such tax collected but not paid
exceeds Rs. 2 crore (as provided under amended Section 89).

Section 91 of the Finance Act is proposed to be amended to delete reference of
Section 89(1)(i) of the Finance Act under Sub-Section (1) and to delete Sub-Section
(3) thereof, again to restrict the power to arrest only to situations where the tax
payer has collected the Service tax but not deposited it with the exchequer, and
amount of such tax collected but not paid exceeds Rs. 2 crore (as provided under
amended Section 89).

Section 93A of the Finance Act, is proposed to be amended so as to enable allowing of rebate by way
of notification as well as rules.Application for rebate may be allowed to be filed within a period of 1
month from the date on commencement of the Finance Bill, 2016.
New Section 101 inserted to allow retrospective Service tax exemption

to canal, dam or other irrigation works:
Definition of Governmental authority as contained under the Mega exemption Notification was
amended with effect from 30.01.2014. Earlier where as both conditions of Government control/equity
and setting up under State/Union law were required, w.e.f. 30.01.2014, either setting up under law is
required or Government control/equity for functions under Article 243W of Constitution are required,
so as to qualify as Government Authority, by and being substituted by or.
Consequently, services provided by way of construction, erection, maintenance, or alteration etc. of
canal, dam or other irrigation works provided to entities set up by Government but not necessarily by
an Act of Parliament or a State Legislature were exempted w.e.f. 30.01.2014 [Entry No. 12(d) of the
Mega Exemption Notification]. However, services provided prior to 30.01.2014 to such bodies
remained taxable.
Now, a new Section 101 is proposed to be inserted to provide Service tax exemption to canal, dam or
other irrigation works with retrospective effect in the following manner:
a)
The benefit of exemption is proposed to be extended to the said services provided during the period
from the 01.07.2012 to 29.01.2014;
b)
Refund of Service tax paid on the said services during the period from 01.07.2012 to 29.01.2014,
shall also be allowed in accordance with the law including the law of unjust enrichment;
c)
Application for refund may be allowed to be filed within a period of 6 months from the date on which
the Finance Bill, 2016 receives the assent of the President.
New Section 102 inserted to allow restoration of certain exemption

withdrawn w.e.f 1-4-2015:
Exemption from Service tax on services provided to the Government, a local authority or a
Governmental authority by way of construction, erection, commissioning etc. of:
(i)
a civil structure or any other original works meant predominantly for use other than for commerce,
industry, or any other business or profession;
(ii)
a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural
establishment;
(iii)
a residential complex predominantly meant for self-use or the use of their employees or other persons
specified in the Explanation 1 to Section 65B(44) of the Finance Act.
was withdrawn with effect from 01.04.2015 [Entry No. 12 of the Mega Exemption Notification].
Now, a new Section 102 is proposed to be inserted to provide restoration for the services provided
under a contract which had been entered into prior to 01.03.2015 and on which appropriate stamp
duty, where applicable, had been paid prior to that date.
Vide corresponding amendmentin the Mega Exemption Notification [New Entry 12A], such exemption is
being restored till 31.03.2020 [Read with Notification No. 9/2016-ST dated 01.03.2016 vide which
changes have been made in the Mega Exemption List of Services];
The services provided during the period from 01.04.2015 to 29.02.2016 under such contracts are also
proposed to be exempted from Service tax;
Refund of Service tax paid on the said services during the period from 01.04.2015 to 29.02.2016, shall
also be allowed - same provisions as discussed, supra, in Section 101.
New Section 103 inserted to allow restoration of certain exemption

withdrawn on Airport or port w.e.f 1-4-2015:
Exemption from Service tax on services by way of construction, erection, commissioning and
installation of original works pertaining to an airport, port was withdrawn with effect from 01.04.2015
[Entry No. 14 of the Mega Exemption Notification].
Now, a new Section 103 is proposed to be inserted to provide restoration for the services provided
under a contract which had been entered into prior to 01.03.2015 and on which appropriate stamp
duty, where applicable, had been paid prior to that date, subject to production of certificate from the
Ministry of Civil Aviation or Ministry of Shipping, as the case may be, to that effect.
Vide corresponding amendment in the Mega Exemption Notification [New Entry 14A], such exemption is
being restored till 31.03.2020 [Read with Notification No. 9/2016-ST dated 01.03.2016 vide which
changes have been made in the Mega Exemption List of Services];
The services provided during the period from 01.04.2015 to 29.02.2016 under such contracts are also
proposed to be exempted from Service tax;
Refund of Service tax paid on the said services during the period from 01.04.2015 to 29.02.2016, shall
also be allowed - same provisions as discussed, supra, in Section 101.
C.
Changes in the Mega Exemption List of Services Vide Notification No.

9/2016-ST dated 01.03.2016 amending Notification No. 25/2012-ST dated
20.06.2012 (Effective From 01.04.2016unless otherwise stated):
Entry No. 6(b) & (c): Exemption Withdrawn
Entry No. 6(b) & (c) has been amended to withdraw exemption in respect of the
following:
Services provided by a senior advocate to an advocate or partnership firm of
advocates and to a person other than a person ordinarily carrying out any activity
relating to industry, commerce or any other business or profession; and
A person represented on an arbitral tribunal to an arbitral tribunal
Hence, Service tax in the above instances would be levied under forward charge.
However, legal services provided by a firm of advocates or an advocate other than
senior advocate is being continued i.e. under Reverse Charge. [Read with
Notification No. 18/2016 ST dated 01.03.2016, amending the Reverse Charge
Notification]
Entry No. 13: Scope expanded to also cover the following:
Services provided by way ofconstruction, erection, commissioning, installation,

completion, fitting out, repair, maintenance, renovation, or alteration of:
(ba)
a civil structure or any other original works pertaining to the In-situ rehabilitation
of existing slum dwellers using land as a resource through private participation
under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana, only for
existing slum dwellers;
(bb)
a civil structure or any other original works pertaining to the Beneficiary led
individual house construction / enhancement under the Housing for All(Urban)
Mission/Pradhan Mantri Awas Yojana.
Entry 14(a): Exemption to construction, erection, commissioning or installation

of original works pertaining to monorail or metro is being withdrawn.
However, the said services, where contracts were entered into before 01.03.2016,
on which appropriate stamp duty, was paid, shall remain exempt.
Entry 16: The threshold exemption limit of consideration charged for services
provided by a performing artist in folk or classical art form of (i) music, or (ii) dance,
or (iii) theatre, has been extended from Rs. 1 lakh to Rs. 1.5 Lakhs per
performance (except brand ambassador).
Entry No. 23(c) deleted: Exemption to services for transport of passengers,

with or without accompanied belongings, by ropeway, cable car or aerial tramway is
being withdrawn.
New Entries inserted to exempt the following:

a)
Entry 9B w.e.f. 01.03.2016: Services provided by the Indian Institutes of

Management (IIM), as perthe guidelines of the Central Government, to their
students, by way of thefollowing educational programmes, except Executive
DevelopmentProgramme, -
(a) two year full time residential Post Graduate Programmes inManagement for the
Post Graduate Diploma in Management, towhich admissions are made on the basis
of Common AdmissionTest (CAT), conducted by Indian Institute of Management;
(b) fellow programme in Management;
(c) five year integrated programme in Management;
b)
Entry 9C: Services of assessing bodies empanelled centrally by Directorate

General ofTraining, Ministry of Skill Development and Entrepreneurship by way
ofassessments under Skill Development Initiative (SDI) Scheme;
c)
Entry 9D: Services provided by training providers (Project implementation

agencies) underDeenDayalUpadhyayaGrameenKaushalyaYojana under the Ministry
ofRural Development by way of offering skill or vocational training coursescertified
by National Council For Vocational Training;
d)
Entry 12A and 14A w.e.f. 01.03.2016: Restoration of certain exemptions

withdrawn last year for projects, contracts in respect of which, contract were
entered into before withdrawal of the exemption. [Refer changes discussed supra
under newly proposed Section 102 and Section 103 of the Finance Act, for details];
e)
Entry 14 (ca): Services by way of construction, erection, commissioning,

installation of original works pertaining to low cost houses up to a carpet area of 60
sq.m per house in a housing project approved by the competent authority under the
Affordable housingin partnership component of PMAY or any housing scheme of a
State Government;
f)
Entry No. 23(bb): Service of transportation of passengers, with or without

accompanied belongings, by a stage carriage, was in the Negative list of services
vide Section66D(o)(i) of the Finance Act. With the proposed deletion of said entry
under the Negative List, a new entry is being inserted under the Mega Exemption
Notification so as to exempt services by a stage carriage other than air conditioned
stage carriage;
g)
Entry No. 26(q): Services of general insurance business provided under

Niramaya Health Insurance scheme launched by National Trust for the Welfare of
Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disability Act,
1999 (44 of 1999);
h)
Entry No. 26C: Services of life insurance business provided by way of annuity
under the National Pension System regulated by Pension Fund Regulatory
andDevelopment Authority of India (PFRDA) under the Pension Fund Regulatory And
Development Authority Act, 2013 (23 of 2013);
i)
Entry No. 49: Services provided by Employees Provident Fund Organisation

(EPFO) to persons governed under the Employees Provident Funds and
Miscellaneous Provisions Act, 1952 (19 of 1952);
j)
Entry No. 50: Services provided by Insurance Regulatory and Development

Authority of India (IRDA) to insurers under the Insurance Regulatory and
Development Authority of India Act, 1999 (41 of 1999);
k)
Entry No. 51: Services provided by Securities and Exchange Board of India (SEBI)
set upunder the Securities and Exchange Board of India Act, 1992 (15 of 1992) by
way of protecting the interests of investors in securities and to promote the
development of, and to regulate, the securities market;
l)
Entry No. 52: Services provided by National Centre for Cold Chain Development
underMinistry of Agriculture, Cooperation and Farmers Welfare by way of coldchain
knowledge dissemination;
m) Entry No. 53 w.e.f 01.06.2016: Services by way of transportation of goods by an

aircraft from a place outside India upto the customs station of clearance in India.
New definition provided for certain terms in paragraph 2 relating to definition of

a)
(ba) w.e.f. the date when the Finance Bill, 2016 receives the assent of the President
approved vocational education course means, (i) a course run by an industrial training institute or an industrial training centre
affiliated to the National Council for Vocational Training or State Council for
Vocational Training offering courses in designated trades notified under the
Apprentices Act, 1961 (52 of 1961); or
(ii) a Modular Employable Skill Course, approved by the National Council
ofVocational Training, run by a person registered with the Directorate Generalof
Training, Ministry of Skill Development and Entrepreneurship
b)
(zdd) senior advocate has the meaning assigned to it in Section 16 of

theAdvocates Act, 1961 (25 of 1961).
Definition of educational institutions provided under clause (oa) will be
substituted with the following w.e.f. the date when the Finance Bill, 2016 receives
the assent of the President:
(oa) educational institution means an institution providing services by way of:
(i)
(ii)
(ii)
D.
pre-school education and education up to higher secondary school orequivalent;

education as a part of a curriculum for obtaining a qualification recognised byany
law for the time being in force;
education
as
part
of
an
approved
vocational
education
course;
Changes in Service Tax Rules, 1994 Vide Notification No. 19/2016-ST

dated 01.03.2016(Effective From 01-04-2016 Unless Otherwise Stated):-
Under Rule 2 of the Service Tax Rules, 1994:
Rule 2(1)(d)(i)(D)(II) is being modified so that legal services provided by a senior

advocate shall be on forward charge [Read with corresponding changes in Entry No.
6(b) &(c) of the Mega Exemption Notification, discussed supra];
Rule 2(1)(d)(EEA) making service recipient, that is, mutual fund or Asset
Management Company as the person liable for paying Service tax is being deleted.
Meaning thereby, services provided by mutual fund agents/distributor to a mutual
fund or asset management company are being put under forward charge;
Rule 2(1)(d)(i)(E), which provides for liability of service receiver to pay Service tax
under Reverse Charge in relation to support services provided or agreed to be
provided by Government or Local authority with certain exceptions. Earlier vide
Notification No. 05/2015-ST dated March 1, 2015, it was provided that the word
support from the sub-rule shall be deleted from the date as the Central
Government may notify, by notification in the Official Gazette.
Consequently, vide Notification No. 17/2016 ST dated 01.03.2016,
01.04.2016 is being notified as the date from which the word support shall stand
deleted from Rule 2(1)(d)(i)(E) of Service Tax Rules, 1994 so as to provide that the
liability to pay Service tax on any service provided by Government or local
authorities to business entities shall also be on the service recipient on Reverse
Charge
Basis.
Under Rule 6 ofthe Service Tax Rules, 1994:
Rule 6(1):Following benefits presently available to individual or proprietary firm or partnership firm,
are being extended to One Person Company (OPC) whose aggregate value of taxable services
provided from one or more premises is up to Rs. 50 lakhs in the previous financial year:
a)
Quarterly payment of Service tax and
b)
Payment of Service tax on receipt basis
Rule 6(7A): The Service tax liability on single premium annuity (insurance)
policies is being rationalised and the effective alternate Service tax rate
(composition rate) is being prescribed at 1.4% of the total premium charged, in
cases where the amount allocated for investment or savings on behalf of policy
holder is not intimated to the policy holder at the time of providing of service.
Under Rule 7 of theService Tax Rules, 1994:
Service tax assessees above a certain threshold limit shall also submit an annual
return for the financial year, in suchform and manner as may be specified bythe
CBEC, by the 30th day of November of thesucceeding financial year;

The Central Government may, subject to such conditions or
limitations,specify by notification, an assessee or class of assesses who may not be
required tosubmit the annual return
Under Rule 7B of theService Tax Rules, 1994:
Sub-Rule 2 has been inserted to provide that an assessee, who has filed the
annual return by the due date, may submit a revised return within a period of 1
monthfrom the date of submission of the said annual return.
Under Rule 7C of theService Tax Rules, 1994:
Sub-Rule 2 has been inserted to provide that where the annual return is filed by
theassessee after the due date, the assessee shall pay to the credit of the
CentralGovernment, an amount calculated at the rate of Rs. 100 per day forthe
period of delay in filing of such return, subject to a maximum of Rs. 20,000/-.
A.
Changes in Reverse Charge Mechanism Vide Notification No. 18/2016-ST

dated 01.03.2016 amending Notification No. 30/2012-ST Dated 20.06.2012
(Effective From 01.04.2016):-
In Paragraph I, in clause (A), sub-clause (ib) is omitted to provide that services

provided by mutual fund agents/distributor to a mutual fund or asset management
company are being put under forward charge;
In Paragraph I, in clause (A), sub-clause (ic) is substituted by provided or agreed

to be provided by a selling or marketing agent of lottery tickets in relation to a
lottery in any manner to a lottery distributor or selling agentof the State
Government under the provisions of the Lottery (Regulations) Act,1998 (17 of
1998), to bring in line with changes made in section 65B(44) of the Finance Act;
In Paragraph I, in clause (A), sub-clause (iv), item (B) has been substituted to
provide thatlegal services provided by a senior advocate shall be on forward charge.
Under sub clause (iv) in Item C, the term support has been omitted for services
provided or agreed to be provided by Government or Local authority from a date to
be notified by the Central Government.
Corresponding changes have also been made in Table contained under Paragraph II.
S. No. 6 of Table contained under Paragraph II is amended to delete the

words by way of support services, to provide that the liability to pay Service tax
on any service provided by Government or local authorities to business entities shall
also be on the service recipient on Reverse Charge Basis.
B.
Changes In Abatement Vide Notification No. 8/2016-ST dated

01.03.2016 amendingNotification No. 26/2012-ST dated
20.06.2012 (Effective From 01.04.2016):-
S. No. 2 amended:Presently, Service tax is payable on 30% of the value of service

of transport of goods by rail without Cenvat credit on inputs, input services and
capital goods. Thus, abatement of 70% is presently available in respect of the said
service.It is now proposed to continue with the same level of abatement with
Cenvat credit of input services for transport of goods by rail (other than transport
of goods in containers by rail by any person other than Indian Railway).
S. No. 2A inserted:A reduced abatement rate of 60% with credit of input services
is being prescribed for transport of goods in containers by rail by any person other
than Indian Railway;
S. No. 3 amended:Presently, Service tax is leviable on 30% of the amount

charged for the service of transport of passengers by rail, without Cenvat credit of
inputs, input services and capital goods. Thus, abatement of 70% is presently
available in respect of the said services. It is proposed to continue with the same
level of abatement with Cenvat credit of input services for the said service;
S. No. 7 amended:Presently, S. No. 7 contains abatement for services of goods

transport agency in relation to transportation of goods. It is now substituted for
services of goods transport agency in relation to transportation of goods other than
used household goods;
S. No. 7Ainserted:Abatement on transport of used household goods by a goods

transport agency is provided at the rate of 60% without availment of Cenvat credit
on inputs, input services and capital goods by the service provider (as against
abatement of 70% allowed on transport of other goods by GTA);
S. No. 8 again inserted:Services provided by foreman to a chit fund under the

Chit Funds Act, 1982 are proposed to be taxed at an abated value of 70% [i.e., with
abatement of 30%], subject to the condition that Cenvat credit of inputs, input
services and capital goods has not been availed;
S. No. 9Aamended:Service tax is proposed to be levied on service of

transportation of passengers by air conditioned stage carriage @ 40% after
abatement of 60% (as applicable to transportation of passengers by contract
carriage) without input tax credit, with effect from 01.06.2016 [Read with changes
proposed in Section 66D(o)(i) of the Finance Act, discussed supra);
S. No. 10 amended:At present, Service tax is leviable on 30% of the value of

service of transport of goods by vessel without Cenvat credit on inputs, input
services and capital goods. Thus, abatement of 70% is presently available in respect
of the said service. It is now proposed to continue with the same level of abatement
with Cenvat credit of input services for the said service;
S. No. 11 amended:
In cases where the tour operator is providing services solely of arranging or booking
accommodation for any person in relation to a tour, abatement of 90% is available
with specified conditions;
However, this abatement of 90% cannot be claimed in such cases where the invoice,
bill or challan issued by the tour operator, in relation to a tour, only includes the
service charges for arranging or booking accommodation for any person and does
not include the cost of such accommodation;
There is no change in the rate of abatement or the conditions required to be fulfilled
for claiming the said abatement;
Abatement rates in respect of services by a tour operator in relation to a tour other
than the above, is being rationalised from 75% and 60% to 70%. Consequently, the
definition of package tour as provided under clause b in Paragraph 2,is being
omitted.
S. No. 12 amended:At present, two rates of abatement have been prescribed for
services of construction of complex, building, civil structure, or a part thereof- (a)
75% of the amount charged in case of a residential unit having carpet area of less
than 2000 square feet and costing less than Rs 1 crore, and (b) 70% of the amount
charged in case of other than (a) above, both subject to fulfilment of certain
conditions prescribed therein.
Now, a uniform abatement at the rate of 70% is now being prescribed for services of
construction of complex, building, civil structure, or a part thereof, subject to
fulfilment of the existing conditions.;
C.
Insertion of Explanation BA after paragraph B: At present, there is abatement of

60% on the gross value of renting of motor-cab services, provided no Cenvat credit
has been taken. It is being made clear by way of inserting an explanation that cost
of fuel should be included in the consideration charged for providing renting of
motor-cab services for availing the abatement.
Miscellaneous Clarifications
Incentives received by Air Travel Agents from CCRS: It is clarified that

incentives received by the Air Travel Agents (ATA) from the Companies providing
Computer Reservation System (CCRS) are for using the software and platform
provided by the CCRS like Galileo, Amadeus, etc. The CCRS are providing certain
incentives either for achieving the targeted booking of air tickets or for loyalty for
booking of air tickets using their software system. Thus, Service tax is leviable on
the service provided to CCRS by the ATA for promoting the service provided by
CCRS to Airlines.
Service provided by Container Train Operators: Abatement Notification No.

26/2012-ST dated 20.06.2012 has been amended to provide that transport of goods
by rail (other than transport of goods in containers by any person other than Indian
Railway) shall be eligible for abatement at the rate of 70% with credit of input
services and transport of goods in containers by any person other than Indian
Railway shall be eligible for abatement at the rate of 60% with credit of input
services.
It is also clarified that service provided by the Indian Railways to Container

Train Operators (CTOs) of haulage of their container train (rake of wagons with
containers) is a service of Transport of Goods by Rail and is, therefore, eligible for
abatement at the rate of 70% with credit of input services.
Service provided by ILMs: The Institutes of Language Management (ILMs)

provides services to the educational institutions, which helps such educational
institutions in providing services specified in the Negative List of services. It is
clarified that services provided by the ILMs are not eligible for exemption under
Section 66D (l) of the Finance Act or under Sl. No. 9 of the Notification No. 25/2012ST dated 20.06.2012.
Notification No. 11/2016-ST dated 01.03.2016: Information Technology

Software: With effect from 21.12.2010, media falling under Chapter 85 with
recorded Information Technology Software has been notified under Section 4A of the
Central Excise Act, 1944. Accordingly, Central Excise duty/CVD is to be paid on the
value of such media with recorded Information Technology Software and the
assessable value of such media is required to be determined on the basis of the
retail sale price (RSP) affixed on the package of such media under the Legal
Metrology Act, 2009 (1 of 2010) or the rules made thereunder.
In respect of transactions involving supply of such media bearing RSP, not

amounting to sale/deemed sale, Service tax is being exempted. Thus, only Central
Excise duty is levied on such transactions.
In certain situations like delivering customised software on media, such media with
recorded Information Technology Software, is not required tobear the RSP when
supplied domestically or imported. Difficulties are beingexperienced in the
assessment of such media to Central Excise duty/CVDbesides giving rise to the
issue of double taxation levy of Central Excise duty/CVD as well as service tax. In
order to resolve the issue, media withrecorded Information Technology Software
which is not required to bearRSP, is being exempted from so much of the Central
Excise duty/CVD as is equivalent to the duty payable on the portion of the value of
such Information Technology Software recorded on the said media, which is leviable
to service tax. In such cases, manufacturer/importer would thereforebe required to
pay Central Excise duty/CVD only on that portion of value representing the value of
the medium on which it is recorded along with freight and insurance. The exemption
is subject to the fulfilment of certainconditions. Thus, the levy of Central Excise
duty/CVD and service tax willbe mutually exclusive. (Refer Notification No. 11/2016CE and 11/2016-Customs,both dated 01.03.2016).
D.
CUSTOMS, EXCISE AND SERVICE TAX DISPUTE RESOLUTION SCHEME

2016
In order to reduce litigation and an environment of distrust in addition to

increasing the compliance cost of the tax payers and administrative cost for the
Government, the Customs, Excise and Service Tax Dispute Resolution Scheme 2016
(the Dispute Resolution Scheme 2016) has been introduced.
All the appeals pending before the Commissioner (Appeals) as on 01.03.2016

under the Central Excise Act, 1944 or the Customs Act, 1962 or the Finance Act,
1994 are eligible for settlement under the Dispute Resolution Scheme. However, if
the impugned order is in respect of certain specified cases cannot be settled under
the Dispute Resolution Scheme, 2016.
Further, the cases of eligible assessees can be concluded by paying disputed tax
along with interest and penalty equal to 25% of the penalty imposed under the
impugned order. The eligible assessees are required to make declaration for
settlement after enactment of the Finance Act 2016 between 01.06.2016 and
31.12.2016.
E.
Amendment in the Cenvat Credit Rules, 2004 (the Credit Rules) vide
Notification No. 13/2016-Central Excise (N.T) dated 01.03.2016 (Applicable
w.e.f. 01.04.2016 unless otherwise stated):
Changes in the Cenvat Credit Rules 2004 -Budget-2016

Amendment in the Cenvat Credit Rules, 2004 (the Credit Rules) vide Notification No. 13/2016-Central Excise
(N.T) dated 01.03.2016 (Applicable w.e.f. 01.04.2016 unless otherwise stated):

Changes in Rule 2(a) of the Credit Rules Definition of capital
goods:
Wagons of sub heading 8606 92 of the CETA and equipment and appliance
used in an office located within a factory are being included in the definition
of Capital goods so as to allow Cenvat credit on the same;
Cenvat credit on inputs and capital goods used for pumping of water, for
captive use in the factory, is being allowed even where such capital goods
are installed outside the factory.
Changes in Rule 2(e) of the Credit Rules Definition of exempted

service:
Service by way of transportation of goods by a vessel from customs station of
clearance in India to a place outside India is being excluded from the
definition of exempted service. This would allow shipping lines to take
credit on inputs and input services used in providing the said services.
Changes in Rule 2(k) of the Credit Rules Definition of inputs:

All capital goods having value up to Rs. 10,000 per piece are being included in
the definition of inputs. This would allow an assessee to take whole credit on
such capital goods in the same year in which they are received.
Changes in Rule 3(4) of the Credit Rules w.e.f 01.03.2016:

The 5thproviso to Rule 3(4) of the Credit Rules is being amended so as to
provide that Cenvat credit of any duty specified in sub-rule (1) except NCCD
cannot be utilized for payment of NCCD leviable under Section 136 of the
Finance Act, 2001 on any product (Presently, the 5 thproviso to Rule 3(4)
provides that Cenvat credit of any duty except NCCD cannot be utilized for
payment of NCCD on goods falling under tariff items 8517 12 10 and 8517 12
90 [mobile phones]);
The Credit Rules are being amended to provide that Cenvat credit cannot be
utilised for payment of Infrastructure Cess leviable under sub-clause (1) of
clause 159 of the Finance Bill, 2016. Further, no credit of this Cess would be
available under the Credit Rules.
Changes in Rule 4 of the Credit Rules:

Rule 4(5)(b):Manufacturer of final products is being allowed to take Cenvat
credit on tools of Chapter 82 of the CETA in addition to credit on jigs, fixtures,
moulds & dies, when intended to be used in the premises of job-worker or
another manufacturer, who manufactures the goods as per specification of
manufacturer of final products. It is also being provided that a manufacturer
can send these goods directly to such other manufacturer or job-worker
without bringing the same to his premises;
Rule 4(6):Presently, the permission given by an Assistant Commissioner or
Deputy Commissioner to a manufacturer of the final products for sending
inputs or partially processed inputs outside his factory to a job-worker and
clearance there from on payment of duty is valid for a financial year. It is
being provided that the same would be valid for 3 financial years;

Rule 6(1): is being amended to first state the existing principle that Cenvat
credit shall not be allowed on such quantity of input and input services as is
used in or in relation to manufacture of exempted goods and exempted
service. The rule then directs that the procedure for calculation of credit not
allowed is provided in sub-rules (2) and (3), for two different situations;
Rule 6(2): is being amended to provide that a manufacturer who exclusively
manufactures exempted goods for their clearance up to the place of removal
or a service provider who exclusively provides exempted services shall pay
(i.e. reverse) the entire credit and effectively not be eligible for credit of any
inputs and input services used;
Rule 6(3):is being amended to provide that when a manufacturer
manufactures two classes of goods for clearance upto the place of removal,
namely, exempted goods and final products excluding exempted goods or
when a provider of output services provides two classes of services, namely
exempted services and output services excluding exempted services, then
the manufacturer or the provider of the output service shall exercise one of
the two options, namely, (a) pay an amount equal to 6% of value of the
exempted goods and 7% of value of the exempted services, subject to a
maximum of the total credit taken or (b) pay an amount as determined under
sub-rule (3A);
The maximum limit prescribed in the first option would ensure that the
amount to be paid does not exceed the total credit taken. The purpose of the
rule is to deny credit of such part of the total credit taken, as is attributable
to the exempted goods or exempted services and under no circumstances
this part can be greater than the whole credit;
Rule 6(3A): is being amended to provide the procedure and conditions for
calculation of credit allowed &credit not allowed and directs that such credit
not allowed shall be paid, provisionally for each month. The four key steps
for calculating the credit required to be paid are :(a) No credit of inputs or input services used exclusively in manufacture of
exempted goods or for provision of exempted services shall be available;
(b) Full credit of input or input services used exclusively in final products excluding
exempted goods or output services excluding exempted services shall be
available;
(c) Credit left thereafter is common credit and shall be attributed towards
exempted goods and exempted services by multiplying the common credit
with the ratio of value of exempted goods manufactured or exempted
services provided to the total turnover of exempted and non- exempted
goods and exempted and non-exempted services in the previous financial
year;
(d) Final reconciliation and adjustments are provided for after close of financial
year by 30thJune of the succeeding financial year, as provided in the existing
rule;
New sub-rule (3AA) is being inserted to provide that a manufacturer or a
provider of output service who has failed to follow the procedure of giving
prior intimation, may be allowed by a Central Excise officer, competent to
adjudicate such case, to follow the procedure and pay the amount prescribed
subject to payment of interest calculated at the rate of 15% per annum;
New sub-rule (3AB) is being inserted as transitional provision to provide that
the existing Rule 6 of the Credit Rules would continue to be in operation upto
30.06.2016, for the units who are required to discharge the obligation in
respect of financial year 2015-16;
Rule 6(3B): is being amended so as to allow banks and other financial
institutions to reverse credit in respect of exempted services on actual basis
in addition to the option of 50% reversal;
Explanations 3 and 4 are being inserted in Rule 6(1) so as provide for reversal
of Cenvat credit on inputs/input services which have been commonly used in
providing taxable output service and an activity which is not a service
under the Finance Act;
Sub-rule (4) is being amended to provide that where the capital goods are
used for the manufacture of exempted goods or provision of exempted
service for two years from the date of commencement of commercial
production or provision of service, no Cenvat credit shall be allowed on such
capital goods. Similar provision is being made for capital goods installed after
the date of commencement of commercial production or provision of service;

Rule 7 of the Credit Rules dealing with distribution of credit on input services
by an Input Service Distributor is being completely rewritten to allow an
Input Service Distributer to distribute the input service credit to an
outsourced manufacturing unit also in addition to its own manufacturing
units;
Presently, Rule 7 provides that credit of Service tax attributable to service
used by more than one unit shall be distributed pro rata, based on turnover,
to all the units. It is now being provided that an Input Service Distributor
shall distribute Cenvat credit in respect of Service tax paid on the input
services to its manufacturing units or units providing output service or to
outsourced manufacturing units subject to the conditions specified therein;
Insertion of Rule 7B in the Credit Rules:

Rule 7B is being inserted in Credit Rules, so as to enable manufacturers with
multiple manufacturing units to maintain a common warehouse for inputs
and distribute inputs with credits to the individual manufacturing units. It is
also being provided that a manufacturer having one or more factories shall
be allowed to take credit on inputs received under the cover of an invoice
issued by a warehouse of the said manufacturer, which receives inputs under
cover of an invoice towards the purchase of such inputs. Procedure
applicable to a first stage dealer or a second stage dealer would apply,
mutatis mutandis, to such a warehouse of the manufacturer.

Presently, an invoice issued by a manufacturer for clearance of inputs or
capitals goods is a valid document for availing Cenvat credit. It is being
provided that an invoice issued by a service provider for clearance of inputs
or capital goods shall also be a valid document for availing Cenvat credit;
Changes in Rule 9A of the Credit Rules:
Rule 9A of the Credit Rules is being amended to provide for filing of an annual
return by a manufacturer of final products or provider of output services for
each financial year, by the 30 thday of November of the succeeding year in
the form as specified by a notification by the Board;

The existing sub- rule (2) of Rule 14 prescribes a procedure based on FIFO
method for determining whether a particular credit has been utilized. The
said sub-rule is being omitted. Now, whether a particular credit has been
utilised or not shall be ascertained by examining whether during the period
under consideration, the minimum balance of credit in the account of the
assessee was equal to or more than the disputed amount of credit.
CHANGES IN EXCISE AND CUSTOMS:UNION BUDGET 2016 DETAILED ANALYSIS
Changes in Customs and Central Excise law and rates of duty have been
proposed through the Finance Bill, 2016 (Clauses 113 to 138 for Customs and
Clauses 139 to 144 for Central Excise). In order to prescribe effective rates of
duty and to carry out changes in the Rules made under the respective Acts,
the
following
notifications
are
beingissued:
CUSTOMS
Tariff
Non-Tariff
Notification Nos.
Date
No.11/2016-Customs to No.23/201601.03.2016
Customs
No.30/2016-Customs (NT) to No.
01.03.2016
33/2016-Customs (N.T.)
CENTRAL
EXCISE
Tariff
Non-Tariff
No.5/2016-Central
Excise
No.18/2016-Central Excise
No.5/2016-Central Excise (N.T.)
No.21/2016-Central Excise (N.T.)
to
to
01.03.2016
01.03.2016
CLEAN ENERGY
CESS
No.1 and No. 2/2016-Clean Energy
01.03.2016
Cess
INFRASTRUCTU
RE CESS
No.1/2016-Infrastructure Cess
01.03.2016
Unless otherwise stated, all changes in rates of duty take effect from the
midnight of 29thFebruary / 1stMarch, 2016. A declaration has been made
under the Provisional Collection ofTaxes Act, 1931 in respect of clauses 138
(i), 142 (i), 143 (i), 159, 231 and 232 of the FinanceBill, 2016 so that changes
proposed therein take effect from the midnight of 29 thFebruary / 1stMarch,
2016. The remaining legislative changes would come into effect only upon
the enactmentof the Finance Bill, 2016. These dates may be carefully noted.
UNDER EXCISE:
Excise Duty levied on Certain goods:
Exemption on articles of Jewellery [excluding silver jewellery, other than

studded with diamonds or other precious stones namely, ruby, emerald and
sapphire] withdrawn with a higher threshold exemption upto Rs. 6 crore in a
financial year subject to the eligibility limit of Rs. 12 crore in the preceding
financial year, along with simplified compliance procedure, from Nil to 1%
(without Input Tax Credit [ITC] or 12.5% (ITC). Thus, a jewellery
manufacturer will be eligible for exemption from Excise duty on first

clearances upto Rs. 6 Crore during a financial year, if his aggregate domestic
clearances during preceding financial year were less than Rs. 12 crore.
Branded readymade garments and made up articles of textiles of retail sale
price of Rs. 1000 or more changed from Nil (without ITC) or 6%/ 12.5% (with
ITC) to 2% (without ITC) or 12.5% (with ITC).
Increase in Excise Duty rate on certain goods:
Excise Duty on various tobacco products increased by 10% to 15% other
than beediraised, to discourage consumption of tobacco and tobacco

products.
Domestically
manufactured
charger/adapter,
battery
and
wired
headsets/speakers for supply to mobile phone manufacturers as original

equipment manufacturer, increased from Nil to 2% [without Input Tax Credit
(ITC)] or 12.5% [with ITC].
Routers, broadband Modems, Set-top boxes for gaining access to internet,
set top boxes for TV, digital video recorder (DVR)/network video recorder
(NVR), CCTV camera/IP camera, lithium ion battery [other than those for
mobile handsets] from 12.5% to 4% [without ITC] or 12.5% [with ITC].
Decrease in Excise Duty rate on certain goods:
Exemption from levy of Excise duty provided to improved chulhas (including
smokeless chulhas) capable of burning wood, agrowaste, cowdung,

briquettes and coal has been withdrawn.
Electric motor, shafts, sleeve, chamber, impeller, washer required for the
manufacture of centrifugal pump reduced from 12.5% to 6% where more

than 50% of such pumps are used in agriculture.
Refrigerated containers reduced from 12.5% to 6%.
Micronutrients [covered under S. No. 1(f) of Schedule 1 Part (A) of the
Fertilizer Control Order, 1985 and manufactured by the manufacturers which

are registered under the Fertilizer Control Order, 1985] reduced from 12.5%
to 6%.
Physical mixture of fertilizers, made out of chemical fertilizers on which duty
of Excise has been paid, by Co-operative Societies, holding certificate of

manufacture for mixture of fertilizers under the Fertilizer Control Order,
1985, for supply to the members of such Co- operative Societies, exempted
from 1% (without Input Tax Credit) or 6% (with Input Tax Credit) to Nil.
Excise Duty on Solar lamp exempt from 12.5% to Nil.
Inputs, parts and components, subparts for manufacture of charger/adapter,
battery and wired headsets/speakers of mobile phone, subject to actual user

condition, from 12.5%/ Nil to Nil.
Parts and components, subparts for manufacture of Routers, broadband
Modems, Set-top boxes for gaining access to internet, set top boxes for TV,
digital video recorder (DVR)/network video recorder (NVR), CCTV camera/IP
camera, lithium ion battery [other than those for mobile handsets] from
12.5% to Nil.
Specified Notifications relating to area based exemptions has been amended
to deny the said exemption to the certain specified Industrial Units.

Relief measures under the Central Excise:
Excise duty exemption, presently available to Concrete Mix manufactured at
site for use in construction work at such site extended to Ready Mix Concrete
manufactured at the site of construction for use in construction work.
Mutual exclusiveness of levy of Excise duty and Service Tax on information
technology software [in respect of Software recorded on media NOT FOR

RETAIL SALE] has been ensured by exempting from Excise duty only that
portion of the transaction value on which Service tax is paid, with effect from
01.03.2016.
Exemption from levy of Excise duty has been extended to the power
generation projects based on municipal and urban waste without subject to

any conditions specified for initial setting up of a project for the generation of
power or generation of compressed bio-gas (Bio-CNG) using nonconventional materials.
Amendment in the Central Excise Act, 1944
Section 5A of the Central Excise Act, 1944 (the Excise Act) has been
amended to omit the requirement of publishing and offering for sale any
notification issued, by the Directorate of Publicity and Public Relations of
CBEC.
Section 11A of the Excise Act has been amended to increase the period of
limitation from one year to two years in cases not involving fraud,
suppression of facts, willfulmis-statement, etc.
Section 37B of the Excise Act has been amended to empower the Board for
implementation of any other provision of the said Act in addition to the

power to issue orders, instructions and directions.
The Third Schedule has been amended to:
a)
make some editorial changes, consequent to 2017 Harmonized System of

Nomenclature.
b) include therein:
1) All goods falling under heading 3401 and 3402;
2) Aluminium foils of a thickness not exceeding 0.2 mm;
3) Wrist wearable devices (commonly known as smart watches); and
4) Accessories of motor vehicle.
However, the amendment at b) will come into effect immediately owing to a
declaration under the Provisional Collection of Taxes Act, 1931.
Amendment in the Central Excise Rules, 2002
In case of finalization of provisional assessment, the interest will be
chargeable from the original date of payment of duty.

Reduced the number of returns to be filed by a Central Excise Assessee
above a certain threshold from 27 to 13, that is, one annual and 12 monthly
returns. Monthly returns are already being e-filed. The CBEC will provide for
e-filing of annual return also. This annual return will have to be filed by
Service Tax Assessees also, above a certain threshold, taking total number of
returns to three in a year for them.
Extended the facility for revision of return, hitherto available to a Service
Tax Assessees only, to manufacturers also.

Provided that in cases where invoices are digitally signed, the manual
attestation of copy of invoice, meant for transporter, is done away with.

Miscellaneous
Procedures have been prescribed for obtaining Centralized Excise
Registration in terms of Rule 9 of the Central Excise Rules, 2002 for the
specified manufacturers of articles of jewellery.
Exemption from the procedures of physical verification of premises for
providing registration has been granted to the specified manufacturers of

articles of jewellery.
The Notification No. 9/2012-Central Excise (N.T.) dated 17.03.2012, fixing
the tariff value in respect to articles of jewellery (other than silver jewellery)
has been rescinded.
Instructions are being issued to Chief Commissioners of Central Excise to file
application to Courts to withdraw prosecution in cases involving duty of less
than Rs. five lakh and pending for more than fifteen years.
The existing Central Excise (Removal of Goods at Concessional Rate of Duty
for Manufacture of Excisable and Other Goods) Rules, 2001 are substituted
with the Central Excise (Removal of Goods at Concessional Rate of Duty for
Manufacture of Excisable and Other Goods) Rules, 2016, to simplify the rules,
including allowing duty exemptions to importer/manufacturer based on selfdeclaration instead of obtaining permissions from the Central Excise
Authorities.
Oil Industries Development Cess:
The Oil Industry (Development) Act, 1974 has been amended to reduce the
rate of Oil Industries Development Cess, on domestically produced crude oil,
from Rs. 4500 PMT to 20% ad valorem. The amendment in the said Act will
be effective from the date of assent to the Finance Bill, 2016. Till the
enactment of the Finance Bill, 2016, Notification prescribing 20% effective
rate of Oil Industries Development Cess will be issued by Ministry of
Petroleum & Natural Gas.
Infrastructure Cess:
Infrastructure Cess levied on motor vehicles, of heading 8703, as under:

(a) Petrol/LPG/CNG driven motor vehicles of length not exceeding 4m and
engine capacity not exceeding 1200cc at 1%;
(b) Diesel driven motor vehicles of length not exceeding 4m and engine
capacity not exceeding 1500cc at 2.5%;
(c) Other higher engine capacity and SUVs and bigger sedans at 4%;
Exemption provided to three wheeled vehicles, Electrically operated vehicles,
Hybrid vehicles, Hydrogen vehicles based on fuel cell technology, Motor
vehicles which after clearance have been registered for use solely as taxi,
Cars for physically handicapped persons and Motor vehicles cleared as
ambulances or registered for use solely as ambulance;
Further, no credit of Infrastructure Cess will be allowed, and credit of no
other Duty can be allowed to pay Infrastructure Cess.
However, the said Infrastructure Cess will come into effect immediately
owing to a declaration under the Provisional Collection of Taxes Act, 1931.
Clean Energy Cess:

The Clean Energy Cess has been renamed as Clean Environment Cess. Also,
the Tenth Schedule to the Finance Act, 2010 dealing with Clean Energy Cess
has been amended to increase the Scheduled rate of Clean Energy Cess from
Rs. 300 per tonne to Rs. 400 per tonne. However, the effective rate of Clean
Energy Cess has been increased from Rs. 200 per tonne to Rs. 400 per
tonne.
The increase in Clean Energy Cess will come into effect immediately owing to
a declaration under the Provisional Collection of Taxes Act, 1931.
Summarization of Notification Nos. 5 to 18/2016-Central Excise
dated 01.03.2016
SI.
Notification No.
Description
No.
1.
5/2016-Central
Seeks to suitably amend specified
Excise
notifications relating to area based
exemptions, so as to carry out
Budgetary changes
2.
6/2016-Central
Seeks to suitably amend specified
Excise
notifications relating to area based
exemptions, so as to carry out
Budgetary changes
3.
7/2016-Central
Seeks to amend Notification No.
Excise
7/2012-Central
Excise
dated
17.03.2012 so as to carry out
Budgetary changes
4.
8/2016-Central
Excise
8/2003-Central
Excise
dated
Budgetary changes
5.
9/2016-Central
Excise
1/2011-Central
Excise
dated
Budgetary changes
6.
10/2016-Central
Excise
2/2011-Central
Excise
dated
Budgetary changes
7.
11/2016-Central
Seeks to exempt Central Excise Duty
Excise
on media with recorded Information
Technology Software on so much value
as is equivalent to the value of the
Information
Technology
Software
recorded on the said media which is
leviable to Service tax under the
Finance Act
8.
12/2016-Central
Excise
12/2012-Central
Excise
dated
9.
13/2016-Central
Excise
10.
14/2016-Central
Excise
11.
15/2016-Central
Excise
12.
16/2016-Central
Excise
13.
17/2016-Central
Excise
14.
18/2016-Central
Excise
Budgetary changes
Seeks to rescind Notification No. 62/91Central Excise dated 25.07.1991 so as
to carry out Budgetary changes
33/2005-Central
Excise
dated
Budgetary changes
30/2004-Central
Excise
dated
Budgetary changes
16/2010-Central
Excise
dated
Budgetary changes
42/2008-Central
Excise
dated
Budgetary changes
6/2005-Central
Excise
dated
Budgetary changes
Summarization of Notification Nos. 5 to 21/2016-Central Excise

(N.T.), dated 01.03.2016
SI.
Notification No.
Description
No.
1.
5/2016-Central
Seeks to provide a procedure for
Excise (N.T.)
obtaining Centralized Registration for
manufacturers of articles of jewellery
2.
6/2016-Central
Excise (N.T.)
35/2001-Central Excise (N.T) dated
26.06.2001
3.
7/2016-Central
Rescinds Notification No. 9/2012Excise (N.T.)
Central Excise (N.T) dated 17.03.2012
4.
8/2016-Central
Seeks to further amend Central Excise
Excise (N.T.)
Rules, 2002
5.
9/2016-Central
Seeks to further to amend the Pan
Excise (N.T.)
Masala Packing Machines (Capacity
Determination And Collection of Duty)
Rules, 2008
6.
10/2016-Central
Seeks to further amend the Chewing
Excise (N.T.)
7.
11/2016-Central
Excise (N.T.)
8.
12/2016-Central
Excise (N.T.)
9.
13/2016-Central
Excise (N.T.)
14/2016-Central
Excise (N.T.)
10.
11.
15/2016-Central
Excise (N.T.)
12.
16/2016-Central
Excise (N.T.)
13.
17/2016-Central
Excise (N.T.)
14.
18/2016-Central
Excise (N.T.)
Tobacco and Unmanufactured Tobacco

Packing
Machines
(Capacity
Determination and Collection of Duty)
Rules, 2010
Seeks to further amend Notification No.
20/2001-Central Excise (N.T.), dated
the 30.04.2001 so as to amend the
tariff values prescribed for articles of
apparel and clothing accessories not
knitted or crocheted
Seeks to further amend Notification No.
the 01.03.2016 so as to amend the rate
of abatement from Retail Sale Price for
commodities specified therein and
bring certain commodities under Retail
Sale Price based assessment
Seeks to further amend the Cenvat
Credit Rules, 2004.
27/2012-Central Excise (N.T) so as to
prescribe the time limit for filing
application for refund of Cenvat Credit
under Rule 5 of the Cenvat Credit
Rules, 2004, in case of export of
services.
Seeks to prescribe the rate of interest
at fifteen per cent per annum for the
purposes of section 11AA of the Central
Excise Act, 1944.
42/2001 - Central Excise (N.T.) dated
26.06.2001 so as to make further
amendments
in
notification
No.
42/2001- CE (NT), dated the 26th June
2001
the 02.08.2007 so as to make further
amendments
in
notification
No.
42/2001- CE (NT), dated the 26th June
2001
the 06.09.2004 so as to carry out
15.
19/2016-Central
Excise (N.T.)
16.
20/2016-Central
Excise (N.T.)
17.
21/2016-Central
Excise (N.T.)
Budgetary changes
the 26.06.2001 so as to carry out
Budgetary changes
Seeks to notify new Central Excise
(Removal of Goods at Concessional rate
of Duty for Manufacture of Excisable
Goods), 2016
Seeks amend Notification No. 21/2004Central Excise (N.T) dated 06.09.2004
so as to carry out Budgetary changes
Summarization of Notification Nos. 1 and 2/2016-CEC and

Notification No.1/2016-Infrastructure Cess all dated 01.03.2016
SI.
Notification No.
Description
No.
1.
Notification
Seeks to rescind Notification No.
No.1/2016 Clean 1/2015-Clean
Energy
Cess
dated
Energy Cess
01.03.2015
2.
Notification
No.2/2016 Clean 5/2010-Clean
Energy
Cess
dated
Energy Cess
01.03.2015
3.
Notification
Seeks to provide effective rates of
No.1/2016
Infrastructure Cess on specified goods.
Infrastructure Cess
UNDER CUSTOMS:
Following amendment are being made in the Customs Act, 1962 (the
Customs Act) and the Customs Tariff Act, 1975 (the Customs Tariff
Act) are as under:
Reduction in Customs duty on certain goods:
Refrigerated containers from 10% to 5%;
Mineral fuels and Mineral oils:
(a) Coal; briquettes, ovoids and similar solid fuels manufactured from coal from
2.5%/10% to 2.5%
(b) Lignite, whether or not agglomerated, excluding jet from 10% to 2.5%
(c) Peat (including peat litter), whether or not agglomerated from 10% to 2.5%
(d) Coke and semi-coke of coal, of lignite or of peat, whether or not
agglomerated; retort carbon from 5%/10% to 5%
(e) Coal gas, water gas, producer gas and similar gases, other than petroleum
gases and other gaseous hydrocarbons from 10% to 5%
(f) Tar distilled from coal, from lignite or from peat and other mineral tars,
whether or not dehydrated or partially distilled, including reconstituted tars
from 10% to 5%
(g) Oils and other products of the distillation of high temperature coal tar
similar products in which the weight of the aromatic constituents exceeds
that of the non-aromatic constituents from 2.5%/5%/10% to 2.5%
(h) Pitch and pitch coke, obtained from coal tar or from other mineral tars from
5%/10% to 5%
Chemicals & Petrochemicals:
(a) All acyclic hydrocarbons and all cyclic hydrocarbons [other than paraxylene which attracts Nil Basic Customs Duty and styrene which attracts 2%
Basic Customs Duty] from 5%/2.5% to 2.5%
(b) Denatured ethyl alcohol (Ethanol), from 5% to 2.5%, subject to actual user
condition
(c)
Electrolysers, membranes and their parts required by caustic soda/ potash
unit using membrane cell technology exempted from 2.5% to Nil
Wood in chips or particles for manufacture of paper, paperboard and news
print from 5% to Nil;
Textiles:
(a) Specified fibres and yarns from 5% to 2.5%
(b) Import of specified fabrics [for manufacture of textile garments for export]
of value equivalent to 1% of FOB value of exports in the preceding financial
year exempted from Applicable Rate to Nil, subject to the specified
conditions
Electronics/ Hardware:
(a) Polypropylene granules/resins for the manufacture of capacitor grade plastic
films from 7.5% to Nil
(b) Parts of E-readers from Applicable Rate to 5%
(c) Magnetron of capacity of 1 KW to 1.5 KW for use in manufacture of domestic
microwave ovens, subject to actual user condition, from 10% to Nil.
Specified capital goods and inputs for use in manufacture of Micro fuses, Subminiature fuses, Resettable fuses and Thermal fuses from Applicable Rate to
Nil;
Neodymium Magnet (before Magnetization) and Magnet Resin (Strontium

Ferrite compound/before formed, before magnetization) for manufacture of
BLDC motors, from Applicable Rate to 2.5%, subject to actual user condition;
Increase in Customs Duty on certain goods:

Natural latex rubber made balloons from 10% to 20%;
Imitation jewellery from 10% to 15%;
Metals:
(a) Primary aluminium from 5% to 7.5%
(b) Other aluminium products from 7.5% to 10%
(c) Zinc alloys from 5% to 7.5%
Industrial solar water heater from 7.5% to 10%;
Full exemption on solar tempered glass/solar tempered (anti-reflective coated)
glass withdrawn and 5% concessional Basic Customs Duty imposed, subject
to actual user conditions;
Plans, drawings and designs from Nil to 10%;
Electronics/Hardware:
(a) E-Readers from Nil to 7.5%
Preform of silica for manufacture of telecom grade optical fibre /cables from Nil
to 10%;
Exemption on magnetic - Heads (all types), Ceramic/Magnetic cartridges and
stylus, Antennas, EHT cables, Level meters/level indicators/ tuning indicators/
peak level meters/ battery meter/VC meters/Tape counters, Tone arms,
Electron guns withdrawn, from Nil to Applicable Rate of Basic Customs Duty;
Specified telecommunication equipment [Soft switches and Voice over Internet
Protocol (VoIP) equipment namely VoIP phones, media gateways, gateway
Product/Switch (POTP/POTS), Optical controllers and session border
controllers, Optical Transport equipment; combination of one / more of Packet
Optical Transport Network(OTN) products, and IP Radios, Carrier Ethernet
Switch, Packet Transport Node (PTN) products, Multiprotocol Label SwitchingTransport Profile (MPLS-TP) products, Multiple Input / Multiple Output (MIMO)
and Long Term Evolution (LTE) Products on which 10% BCD was imposed in
2014-15 Budget] being excluded from the purview of the other exemption
also, now taxable from Nil to 10%;
Reduction in Special Additional Duty (SAD) on certain goods:

Orthoxylene, from 4% to 2%, for the manufacture of phthalic anhydride subject
to actual user condition;
Exemption from SAD withdrawn fully or in some cases, imposed
reduced SAD on certain goods:

Populated PCBs for manufacture of personal computers (laptop or desktop)
from Nil to 4%;
Populated PCBs of mobile phone/tablet computer withdrawn. Concessional SAD
on populated PCBs for manufacture of mobile phone/tablet computer
imposed from Nil to 2%;
Miscellaneous:
Concessional Basic Customs Duty as presently available under project imports
for cold storage, cold room (including for farm level pre-cooling) also
extended for cold chain including pre-cooling unit, pack houses, sorting and
grading lines and ripening chambers from 10% to 5%;
Machinery, electrical equipment, instrument and parts thereof (except
populated PCBs) for semiconductor wafer fabrication/LCD fabrication units
exempted from Applicable Rate of Basic Customs Duty and SAD at 4%;
Machinery, electrical equipment, instrument and parts thereof (except
populated PCBs) imported for Assembly, Test, Marking and Packaging of
semiconductor chips (ATMP) exempted from Applicable Rate of Basic
Customs Duty and SAD at 4%;
The exemption from Basic Customs Duty, Countervailing Duty, SAD on
charger/adapter, battery and wired headsets/speakers for manufacture of
mobile phone is withdrawn, now Basic Customs Duty taxable at Applicable
Rate, Countervailing Duty at 12.5% and SAD at 4% on it;
Inputs, parts and components, subparts for manufacture of charger / adapter,
battery and wired headsets /speakers, of mobile phone, subject to actual
user condition exempted from Applicable Rate of Basic Customs Duty,
Countervailing Duty and SAD;
Parts and components, subparts for manufacture of Routers, broadband
Modems, Set-top boxes for gaining access to internet, set top boxes for TV,
digital video recorder (DVR)/network video recorder (NVR), CCTV camera/IP
camera, lithium ion battery [other than those for mobile handsets] exempted
from Applicable Rate of Basic Customs Duty, Countervailing Duty and SAD;
Changes in the Customs provisions and Rules made there under

Sl.
Amendment
Clause
No.
of the
Finance
Bill,
2016
1.
2.
3.
4.
5.
6.
7.
8.
9.
10
11.
Subsection (43) of Section 2 is being amended so

as to add a new class of warehouses for enabling
storage of specific goods under physical control of
the department, as control over the other types of
warehouses would be
only record based.
Subsection (45) of Section 2 which defines
warehousing station is being omitted.
Chapter heading of Chapter III is being amended to
omit the word warehousing station.
Section 9 is being omitted.
Section 25 is being amended so as to omit the
requirement of publishing and offering for sale any
notification issued, by the Directorate of Publicity
and Public Relations of CBEC
Sections 28, 47, 51 and 156 are being amended so
as to:
a) increase the period of limitation from one year to
two years in cases not involving fraud, suppression
of facts, willfulmis-statement, etc.
b) provide for deferred payment of customs duties
for importers and exporters to certain class of
importers and exporters.
Section 53 is being amended so as to enable the
Board to frame regulations for allowing transit of
certain goods and conveyance without payment of
duty.
Sections 57 and 58 are being substituted to provide
for licensing by the Principal Commissioner or
Commissioner, in place of Deputy/Assistant
Commissioner, subject to such conditions as may
be prescribed.
New section 58A is being inserted to provide for a
new class of warehouses which require continued
physical control and will be licensed for storing
goods, as may be specified.
New section 58B is being inserted so as to regulate
the process of cancellation of licences which is a
necessary concomitant of licensing.
The existing section 59 governing warehousing
bonds submitted by importers availing duty
deferred warehousing is being substituted so as to
113
113
114
115
116
117
118
119
135
120
121
122
122
122
123
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
fix the bond amount at thrice the duty involved and

to furnish security as prescribed.
The existing section 60 is being substituted to
define the date of removal of goods from a customs
station and deposit thereof in a warehouse.
The existing section 61 is being substituted to
extend the period of warehousing to all goods used
by Export Oriented Undertakings, Units under
Electronic Hardware Technology Parks, Software
Technology Parks, Ship Building Yards and other
units manufacturing under bond; empower Principal
Commissioners and Commissioners to extend the
warehousing period upto one year at a time.
Section 62 relating to physical control over
warehoused goods is being omitted since the
conditions for licensing different categories of
warehouses and exercising control over the same
are being provided under sections 57, 58 and 58A.
Section 63 relating to payment of rent and
warehouse charges is being omitted in view of the
privatization of services, and free market
determination of rates, including those by facilities
in the public sector.
The existing section 64 relating to owners rights to
deal with warehoused goods is being substituted so
as to rationalize the facilities and rights extended
under the section.
Section 65 is being amended to delete the payment
of fees to Customs for supervision of manufacturing
facilities under Bond; and empower Principal
Commissioner or Commissioner of Customs to
licence such facilities.
Section 68 is being amended to omit rent and other
charges on account of omission of section 63.
Section 69 is being amended to omit rent and other
charges on account of omission of section 63.
Section 71 is being amended so as to substitute the
word exportation with the word export to align
with definition contained in sub section (18) of
section 2.
Section 72 is being amended to delete clause (c)
regarding improper removal of samples
Section 73 is being amended to provide for
cancellation bond in case of transfer of ownership
of the goods, and is thus aligned with sub-section
124
125
126
126
127
128
129
130
131
132
133
23.
Amendment in the Customs Tariff Act

Sl.
Amendment
No.
1.
(5) of section 59.

New section 73A is being inserted so as to provide
for
custody
of
warehoused
goods
and
responsibilities including the liabilities of warehouse
keepers.
To omit Section 8C [Power of Central Government to

impose transitional product specific safeguard duty
on imports from Peoples Republic of China]
134
Clause
of the
Finance
Bill,
2016
137
Amendment in the First Schedule to the Customs Tariff Act

Sl.
Amendment
Clause
No.
of
the
Finance
Bill,
2016
Amendments not affecting rates of duty
1.
Editorial changes in the Harmonized System of 138(ii)
Nomenclature (HSN) in certain chapters are being
incorporated in the First Schedules, to be effective
from 01.01.2017.
2.
To:
138(i)
1) Amend supplementary notes (e) and (f) Chapter
27 so as to change the reference:
a) from IS:1460:2000 to IS:1460:2005 for high
speed diesel (HSD) and
b) from IS:1460 to IS: 15770:2008 for light diesel oil
(LDO);
2) Substitute Tariff line 5801 39 10 with description
Warp pile fabrics, uncut in place of tariff line 5801
37 11 [with description Warp pile fabrics epingle
uncut velvet] and 5801 37 19 [with description
Warp pile fabrics epingle uncut other];
3) Prescribe separate tariff lines for laboratory
created or laboratory grown or manmade or
cultured or synthetic diamonds;
4) Delete Tariff line 8525 50 50, relating to Wireless
microphone.
Summary of the Customs Tariff Notification:

Sl. No
1.
2.
3.
4.
5.
6.
7.
8.
11/2016-Customs
12/2016-Customs
13/2016-Customs
14/2016-Customs
15/2016-Customs
16/2016-Customs
17/2016-Customs
18/2016-Customs
9.
10.
19/2016-Customs
20/2016-Customs
11.
21/2016-Customs
12.
13.
22/2016-Customs
23/2016-Customs
Notifications
Summary of the Customs Non-Tariff Notification:

Sl. Notificat
N
ion No.
o
1. 30/2016Customs
(NT)
2. 31/2016Customs
(NT)
3. 32/2016Customs
(NT)
4. 33/2016Customs
(NT)
Description
Seeks to notify Baggage Rules, 2016.
Seeks to further amend Customs Baggage
Declaration (Amendment) Regulations, 2016.
Seeks to notify the Customs (Import of Goods at
Concessional Rate of Duty for Manufacture of
Excisable Goods), Rules 2016.
Seeks to fix the rate of interest under section 28AA
of the Customs Act, 1962 and supersede notification
No. 17/2011- Cus (N.T) dated 01.03.2011.
ADDITIONAL DEDUCTION OF RS 50000/- FOR NEW HOME LOAN U/S 80EE

The existing provisions of section 80EE provide a deduction of up to 1 lakh rupees in respect of interest paid on loan
by an individual for acquisition of a residential house property. This benefit is available for the two assessment years
beginning on the 1st day of April 2014 and on the 1st day of `
In furtherance of the goal of the Government of providing 'housing for all', it is proposed to incentivise first -home
buyers availing home loans, by providing additional deduction in respect of interest on loan taken for residential
house property from any financial institution up to Rs. 50,000. This incentive is proposed to be extended to a house
property of a value less than fifty lakhs rupees in respect of which a loan of an amount not exceeding thirty five lakh
rupees has been sanctioned during the period from the 1st day of April, 2016 to the 31st day of March, 2017. It is also
proposed to extend the benefit of deduction till the repayment of loan continues.
The deduction under the proposed section is over and above the limit of Rs 2,00,000 provided for a self-occupied
property under section 24 of the Act
Clause 37. For section 80EE of the Income-tax Act, the following section shall be substituted with effect from the 1st
day of April, 2017, namely:
80EE. (1) In computing the total income of an assessee, being an individual, there shall be deducted, in accordance
with and subject to the provisions of this section, interest payable on loan taken by him from any financial institution
for the purpose of acquisition of a residential property.
(2) The deduction under sub-section (1) shall not exceed fifty thousand rupees and shall be allowed in computing the
total income of the individual for the assessment year beginning on the 1st day of April, 2017 and subsequent
assessment years.
(3) The deduction under sub-section (1) shall be subject to the following conditions, namely:
(i) the loan has been sanctioned by the financial institution during the period beginning on the 1st day of April, 2016
and ending on the 31st day of March, 2017;
(ii) the amount of loan sanctioned for acquisition of the residential house property does not exceed thirty-five lakh
rupees;
(iii) the value of residential house property does not exceed fifty lakh rupees;
(iv) the assessee does not own any residential house property on the date of sanction of loan.
(4) Where a deduction under this section is allowed for any interest referred to in sub-section (1), deduction shall not
be allowed in respect of such interest under any other provision of this Act for the same or any other assessment
year.
(5) For the purposes of this section,

(a) financial institution means a banking company to which the Banking Regulation Act, 1949 applies, or any bank or
banking institution referred to in section 51 of that Act or a housing finance company;
(b) housing finance company means a public company formed or registered in India with the main object of carrying
on the business of providing long-term finance for construction or purchase of houses in India for residential
purposes.
INCREASE IN HOUSE RENT ALLOWANCE EXEMPTION LIMIT U/S 80GG

As you have seen on various website and TV that House rent allowance limit has been increased from 24000/- from
60000/- but this limit is not applicable for salaried persons getting HRA.
The existing provisions of Section 80GG provide for a deduction of any expenditure incurred by an individual in
excess of ten per cent of his total income towards payment of rent in respect of any furnished or unfurnished
accommodation occupied by him for the purposes of his own residence if he is not granted house rent allowance by
his employer, to the extent such excess expenditure does not exceed two thousand rupees per month or twenty-five
per cent of his total income for the year, whichever is less, subject to other conditions as prescribed therein.
In order to provide relief to the individual tax payers, it is proposed to amend section 80GG so as to increase the
maximum limit of deduction from existing Rs. 2000 per month to Rs. 5000 per month.
Detail of deduction for house rent under section 80GG .
Deduction under section 80GG for house rent paid:Deduction u/s 80GG is available if following condition are satisfied
Deduction is available to Individual Assessee only.
He has not received HRA(house rent allownace ) from his employer if he is a salaried person otherwise he
should be self employed.
He has paid house rent for his own residence.
He or his spouse or his minor child or HUF(of which he has a member) should not have a residential house
where he ordinarily resides or performs duties of his office or employment or carries on his business or
profession;
He should not have a house owned by him, which is under his occupation and value of that is not being
taken as nil under section 23(2)(a) or 23(4).
A declaration on Form 10BA should be submitted .
so if conditions are satisfied then you can claim deduction u/s 80GG for house rent paid
Amount of deduction:Least of the following is deductible u/s 80GG
Rs 5000 per month wef 01.04.2016 (2000 per month up to 31.03.2016).
25 % of total income
the excess of actual rent paid over 10 % of total income
Total Income means income excluding long term and short term gain under section 111A and income referred to in
section 115A or 115D but before making any deduction under section 80C to 80U.

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1.

Relief to small tax payers

7. Simplification and rationalization of taxation

Tax Deduction at Source and Tax Collection at Source

Section 192A (Payment of accumulated balance of PF due to an employee)-Proposed to increase the

Tax Collection at Source (TCS) on sale of vehicles; goods or services

CHANGES IN SERVICE TAX -BUDGET2016 DETAILED

changes under Service TAX

Enabling provision for levy of KrishiKalyan Cess (w.e.f 01.06.2016):

An enabling provision is being made to empower the Central Government to

Changes in relation to the Negative List Section 66D of the Finance

Section 66D(l):Proposed to be deleted

Section 66D(o)(i):Proposed to be deleted w.e.f. 01.06.2016

Section 66D(p)(ii):Proposed to be deleted w.e.f. 01.06.2016

Changes in Section 65B of the Finance Act:

Changes in Section 66E of the Finance Act:

Reverse charge Notification No. 30/2012-ST is being amended so as to delete the

Changes in Section 67A of the Finance Act:

Changes in Section 73 of the Finance Act:

Changes in Section 75 of the Finance Act:

Collection of any amount as Service tax but failing to

Other than in situations covered under serial number

Changes in Section 78A of the Finance Act:

Changes in Section 89 of the Finance Act:

Changes in Section 90 of the Finance Act:

Changes in Section 91 of the Finance Act:

Changes in Section 93A of the Finance Act:

New Section 101 inserted to allow retrospective Service tax exemption

New Section 102 inserted to allow restoration of certain exemption

New Section 103 inserted to allow restoration of certain exemption

Changes in the Mega Exemption List of Services Vide Notification No.

Entry No. 13: Scope expanded to also cover the following:

Services provided by way ofconstruction, erection, commissioning, installation,

Entry 14(a): Exemption to construction, erection, commissioning or installation

Entry No. 23(c) deleted: Exemption to services for transport of passengers,

New Entries inserted to exempt the following:

Entry 9B w.e.f. 01.03.2016: Services provided by the Indian Institutes of

Entry 9C: Services of assessing bodies empanelled centrally by Directorate

Entry 9D: Services provided by training providers (Project implementation

Entry 12A and 14A w.e.f. 01.03.2016: Restoration of certain exemptions

Entry 14 (ca): Services by way of construction, erection, commissioning,

Entry No. 23(bb): Service of transportation of passengers, with or without

Entry No. 26(q): Services of general insurance business provided under

Entry No. 49: Services provided by Employees Provident Fund Organisation

Entry No. 50: Services provided by Insurance Regulatory and Development

m) Entry No. 53 w.e.f 01.06.2016: Services by way of transportation of goods by an

New definition provided for certain terms in paragraph 2 relating to definition of

(zdd) senior advocate has the meaning assigned to it in Section 16 of

pre-school education and education up to higher secondary school orequivalent;

Changes in Service Tax Rules, 1994 Vide Notification No. 19/2016-ST

Under Rule 2 of the Service Tax Rules, 1994:

Rule 2(1)(d)(i)(D)(II) is being modified so that legal services provided by a senior

Under Rule 6 ofthe Service Tax Rules, 1994:

Quarterly payment of Service tax and

Payment of Service tax on receipt basis

Under Rule 7 of theService Tax Rules, 1994:

Under Rule 7C of theService Tax Rules, 1994:

Changes in Reverse Charge Mechanism Vide Notification No. 18/2016-ST

In Paragraph I, in clause (A), sub-clause (ib) is omitted to provide that services

In Paragraph I, in clause (A), sub-clause (ic) is substituted by provided or agreed

S. No. 6 of Table contained under Paragraph II is amended to delete the

Changes In Abatement Vide Notification No. 8/2016-ST dated

S. No. 2 amended:Presently, Service tax is payable on 30% of the value of service

S. No. 3 amended:Presently, Service tax is leviable on 30% of the amount